HC Deb 22 June 1910 vol 18 cc440-58

Postponed Proceeding on Question, "That a further sum, not exceeding £9,124,000, be granted to His Majesty, on account, for or towards defraying the Charges for the following Civil Services and Revenue Departments for the year ending on the 31st day of March, 1911."

Debate resumed.


When the House passed to private business to-night I was endeavouring to call attention to a breach of a Section of the Finance Act of this year. Hon. Gentlemen opposite think that Government by Administrative Order is for practical purposes quite as excellent a form of Government as Government by legislation. No doubt there is something to be said in favour of that proposition, but one does not exactly expect to hear it said from the Front Bench when a Radical Government is in office. When the champions— the self-appointed champions in some cases—of the legislative authority of the people of this country are responsible for the administration of the country, we expect, at any rate, that they will pay respect to their own professions of political principle. This case is a very flagrant one. It concerns the regulations made by the Commissioners of Inland Revenue. The system of taxation which was introduced by the Finance Act has probably given rise to more profound dissatisfaction among certain classes in this country than any taxation which has been introduced perhaps for two or three centuries. One of these provisions of the new scheme of taxation was that which empowered the Commissioners of Taxes in the various taxing departments to make regulations for the purpose of the enforcement of the general intentions of the Act of Parliament. So far so good. But the Legislature, in entrusting them with that power, provided that all regulations which they should make should be laid before each House of Parliament as soon as might be after they were made. We were told this afternoon by the Chancellor of the Exchequer that regulations were made by the Commissioners of Taxes as long ago as 2nd May; regulations which the Solicitor-General assured the House have the ex post facto operation of taking people out of the protection of the common law as to their rights of notice of matters affecting them, and other rights in respect of elementary matters of that kind. Although this House has directed that such regulations should be laid before the Houses of Parliament as soon as may be after they are made, here we are at 22nd June, and I understand that these regulations have not been effec- tively laid up to the present time. They are regulations which are of some consequence, because one of them provides that the Surveyor of taxes, or whoever is administering the Finance Act, may serve a man with notice of the regulations and requirements which will render him liable to a penalty in the case of non-observance, although that notice is sent to him at a place where he does not live. Such notices were sent out in sheaves in the course of the month of May. We are assured that none of them were sent out before 2nd May. For my part I accept quite unreservedly an assurance of that kind which is given by the Chancellor of the Exchequer. What has happened is that, according to the view of the Solicitor-General, although a man has been served with notice according TO the regulations of the Taxing Commissioners, at a place where he does not live, on a day when these regulations, at any rate, have not been laid before the House of Commons, and nobody knows anything about them; though he has been served with that notice in a manner which under any other system except that provided by the regulations is of no effect or validity at all in point of law; he has become liable to penalties prescribed by the Act— which are some of the severest penalties which have ever been introduced into taxing Statutes, because the Commissioners had made regulations which, whether made earlier or later, the Solicitor-General assured the House would have the same effect.

If it was intended that regulations of this sort should have ex post facto effect it would have been desirable in the interests of the people of this country, and especially in the interests of those subjected to the exceptional taxation provided in the Finance Act, that this House should have had an opportunity, as it prescribed for itself, of considering these regulations. Seven weeks have gone by, yet the regulations have not yet been submitted to this House, and when the attention of the House is called to the matter the Solicitor-General says it is a subject of purely academic interest, because the regulations took effect and have retrospective operation; and, in the second place, the Solicitor-General assured the House that in particular instances no notice was issued before these regulations were made. The period of forty days, provided under Section 93 of the Finance Act, was the period in which this House could make effective representation to the Crown with a view to the annulment of any regulations made administratively by the Commission. I do not suggest that in the present instance the House would make such a regulation, because it may be assumed that the Commissioners of taxation and the surveyors will not subject themselves to any unnecessary obliquy in collecting these taxes from the public; but the Department in this case offers a deliberate denial to the intention of Parliament, and the only excuse given to the House is that this is a purely academic matter. That, no doubt, is the kind of reply which hon. Members opposite would say they might expect from a crusted, high and dry Tory administration; but it is not the sort of a reply that should be expected from His Majesty's present Government.


The point which I desire to raise is not a partisan point, but one of administration, which concerns a number of people. It is a question of the policy of administration which might be pressed to a point that would concern a considerably larger number of people. I hope to enlist the sympathy of the right hon. Gentleman the Secretary for the Treasury in the course of the few remarks I have to make, and I hope he will be in a position to promise some reconsideration of the course that has been taken. The matter to which I refer is that of the repayment of Income Tax on life insurance premiums, whether paid by single premium or by premiums over a term of years.

To make my point clear, I would remind hon. Members who may not be familiar with the subject that life insurance policies are paid in one of three manners, namely, by premiums paid annually during the life of the insured or over a fixed term of years that may vary from two years up to fifteen years or twenty years or more, or they may be paid by one single lump sum or premium. By the original Act, 1854—I speak from memory—persons who paid premiums for the security of life insurance policy were allowed a remission of Income Tax upon the premiums paid, and one of the reasons that induced the Government to make this remission was this, that the sum of money paid to the insurance company by way of premium is not dissipated among the community, but immediately begins to fructify from the Revenue point of view. It is invested and re-invested at compound interest by the company. So far the Government scores at the beginning out of the life insurance policy. When it matures the Government get the benefit by Death Duties accruing from it, so that they score doubly. It encourages people to insure, thereby benefiting the Revenue, and incidentally it distinctly encourages various classes in the country to look more closely to habits of thrift than perhaps they otherwise would.

Therefore we may say that this remission of the Income Tax is wholly for the benefit of the State both directly and indirectly. The practice for many years has been to allow the repayment of Income Tax from premiums, whether paid on the whole life of a man or premiums for a term of years, or whether paid in one lump sum. Now, for the first time—and the Inland Revenue have altered the practice of years, and have declined to make any remission of Income Tax to people who pay their premiums in one lump sum—I feel that the attention of the House should be called to this change of policy for this reason. The answer of the Inland Revenue will no doubt be this: that in the original Act the wording is "annual premium." They may say, and with some justice, that they have changed their practice because they have come to the conclusion that a single payment is not an annual premium; but if the Department is to have power, without criticism to go back on the practice of years, there is nothing to prevent them, next year or the year after, when they want more money, from saying that a premium extending over five years or ten years does not constitute an annual premium, and they may decline to allow this benefit to the policy-holding public, who are accustomed to receive such benefits for many years, and on the faith of which they have taken out such policies, and made their arrangements.

The class of people who have taken out these policies is a class which I think this House would do well to protect. The single-premium policies are not paid so much by rich people; they are largely paid by professional people and by literary people with fluctuating incomes, who are only too glad when they have a good year —perhaps when they sell a good book or picture, or something like that—to put the lump sum they have got possession of into a perfectly safe investment at compound interest by purchasing a life assurance policy. They insure in the event of their early death, a much larger benefit for the family left behind than they could possibly have if they invested in the ordinary form of investment. The point I wish to bring to the attention of the Secretary to the Treasury is this: I ask him to consider whether it is quite fair for the Board of Inland Revenue to reverse their practice. I do not want to enter upon any controversial matter, but I ask the right hon. Gentleman if he does not recognise the hardship that it is to a deserving class of people, and if he does not think that, though the action of the Board of Inland Revenue may be in strict accordance with the Act of 1854, it is not in accordance with the spirit, because the spirit of that Act was to grant remissions of Income Tax upon premiums paid without reference to the manner in which these premiums were paid. I want the Secretary to the Treasury to consider whether it is fair that a Government Department should prejudice one form of payment of premiums as against another form. If he feels that he must uphold the Commissioners in this matter and agrees with them that they are acting in accordance with the letter of the Act, perhaps he will consult the Chancellor of the Exchequer to see if it is possible in the forthcoming Budget to introduce such words as may be necessary in order to give the benefit of the Act of 1854 to those who have paid their life insurance policy in single premiums equally with those who pay at periods extending over their lives or for a limited number of years.


I wish to emphasise the point made by the hon. Member who has just sat down. It is not right that people who pay their insurance by a single premium should have different treatment to those who spread the payment over their lives or over a considerable period of it. There is no real difference in the principle by which the premiums are calculated by the insurance offices. In the one case they regard the amount as a premium covering the whole contingency, and the other covers the contingency as it matures. I think the people who take out these policies have indirectly another grievance owing to the manner in which the offices themselves are taxed by the Inland Revenue officials. The grievance I alluded to is that life insurance companies are taxed upon the whole of their interest earnings, and they are not taxed upon the profits which the business may disclose from time to time. This is a matter to which attention ought to be given by our officials because, after all, it is a matter where the savings of the people as a whole are at stake. These companies are really the trustees of the savings of the people, and in many cases they are mutual institutions not making profits for shareholders. Therefore I think it may be properly contended that the present method of the calculation of Income Tax upon the whole of the interest earnings of these concerns is improper and unfair, because the interest earnings are just as much a part of the capital which has to be eventually returned to the policy holders in interest on investments as the original premiums.

9.0 P.M.


I wish to emphasise the observations which were made by the hon. Member for Exeter as to the circumstances under which these regulations have been made. I submit they have been put before the country in a way that no public Department has ever done before, and under circumstances which require that the Government should take the earliest opportunity available of testing their legality in order that the mind of the public may be set at rest. I wish to ask a further question as to the basis upon which these notices have been issued. The Commissioners appear to judge more by the outer appearance of a man; they assume that he is in receipt of an income liable to Super-tax, and then they put upon him the duty of proving that he is not liable. The Chancellor of the Exchequer said the Board of Inland Revenue have at their service a vast amount of information in the records of other Departments. That may be so, and in that case I think it is the duty of the Special Commissioners to go to those Departments and ascertain what has been approximately the average return for Income Tax made by an individual in order to find out whether his income comes near the borderline of £5,000 before sending him the notice requiring particulars which have already been submitted to another Government Department. I protest against the public being put to this trouble by a Radical Government. [HON. MEMBERS: "Oh, oh!"] I protest against this because they are proving themselves to be the veriest tyrants this country has ever had to submit to. Not only have people to deal with the ordinary returns for public purposes, but without the slightest inquiry or the least attempt to obtain the information from other Departments, you are putting persons to the trouble of filling up these forms. I presume these inquisitorial regulations have been carefully drafted and redrafted during the long period when the Finance Act of last year was in the balance. We find that three days after the Act received the Royal Assent these forms were issued to the public, although a copy was not laid upon the Table of this House until 16th June. Surely when penalties are enacted, and when the unfortunate members of the public who are to receive them are singled out in such a haphazard way, some care ought, at least, to be taken b5~ these autocratic Departments and these autocratic Ministers who rule them that every facility shall be given to make these rules easily intelligible and regular in every respect before they are thrown at the heads of the taxpaying public. I can only say the right to make these inquiries is very seriously challenged by men who, under ordinary circumstances, would never dream of delaying the payment of a tax or the making of a return, men who hold public positions, and who think it their duty at once to acquiesce in any reasonable demand the public service makes upon them. These inquisitorial inquiries are regarded as being wholly unauthorised and improper, and the Inland Revenue Commissioners must not be surprised if they find men of position, men who have hitherto, perhaps, been looked upon as persons most closely affected to the Government's interests, take up the position that they will not submit to an unnecessary inquisition of this kind, for which there is not the least justification.


I do not wonder the House was amused at the idea of the hon. Member on the Tory benches (Mr. Nield) of the British public. According to the hon. Member the British public consists of people with over £2,000 a year.


I do not know what words I used to lead the hon. Member to draw any such inference. I think he may rely on the ordinary sense of an hon. Member of this House to know that the British public is a very much vaster community than that composed of individuals with over £2,000 a year.


I wish to emphasise that. Persons of incomes of under £2,000 a year have to make those returns, and the great inconvenience the British public is being put to in connection with the Super-tax is that persons with over £2,000 have now to do that which persons with under £2,000 have been doing for years. The hon. Member also has a most singular idea as to the manner in which these notices have been sent out. According to him it has been done wholly on outward appearance. He is crediting the Income Tax Commissioners with a very wide acquaintance with all the members of the British public if he thinks they have sent out returns simply on outward appearance. I presume there are one or two members in the office who may have taken the steps he suggests. I desire, however, to turn to the other end of the scale and to draw attention to the effect of the regulations with regard to the Increment Tax of small holders of property, and particularly long leaseholders. There is a certain amount of nervousness among these and others as to whether the requirements of the Inland Revenue in connection with the Increment Duty may not cause some delay in the completion of titles. I should like to know if there has been any experience on which any information can be given to the House, so that these small holders may be reassured, or whether, as a matter of fact, purchases are being delayed owing to these regulations.

I should also like to point out the cost imposed by them in respect of very small properties. In order to carry out the provisions of the Finance Act and the regulations thereunder with regard to conveyances, a vendor has to prepare a form containing some particulars of the property sold, together with a copy of the intended conveyance, a plan of the premises, and, where they are subject to any easements or restrictive covenants, to furnish particulars of these easements and restrictive covenants. It may very well be, and indeed it generally does happen, that deeds containing the restrictive covenants are not in the possession of vendors of small property, and vendors are put to a good deal of cost and trouble in obtaining the necessary particulars, with the additional result of delay. With regard to the smallest transactions, the minimum cost of furnishing these documents and particulars would probably be a guinea, and this will not in any case be adequate remuneration for the work undertaken. In many cases it is not improbable that the cost may be several guineas, and where the property is very small and there is consequently nothing due the burden upon the vendor is very considerable. The same class suffers from what is probably a clerical oversight in the Finance Act. This doubles the Stamp Duty on leases. A great many leases are granted in consideration of a premium and an annual rent. Where the conveyance duty is under £500 the old 10s. per cent. ad valorem duty remains, but in other transactions the amount is raised to 20s. per cent. The Inland Revenue authorities have interpreted the provisions of the Act to mean that where land is granted by way of lease in consideration of a premium and of a rent the minimum rate of Conveyance Duty is not applicable to the premium. That is to say, in the case of a premium of £300 according to their view the Stamp Duty would be £3 and not 30s. They base this upon the contention that it is a lease and not a conveyance on sale, and therefore is subject to double duty. I hope the attention of the Chancellor of the Exchequer will be directed to this point, and particularly to the possibility of delay in the completion of purchases owing to the regulations which have been made.


I have listened with considerable interest to the speeches explaining the grievances of gentlemen who have to pay the Super-tax in consequence of having to fill up a number of elaborate forms giving particulars of their income. I am not altogether out of sympathy with those grievances, but they do not impress me like the grievance of a similar kind to which reference was made by the last speaker. As a solicitor I have, of course, first-hand knowledge of the expense, trouble,, and anxiety which has been caused to a very large number of small owners of property during the last few weeks by the elaborate returns which they are obliged to make, giving particulars, which are supposed to be necessary, to enable the Inland Revenue authorities to fix the liability for the Increment Value Duty. I can corroborate what has been said by the hon. Member as to the expense to which these people are being put in this way, and to small people the grievance is a very real one. It is aggravated by the fact that, so far as these small transactions are concerned, it is in the highest degree unlikely that any benefit will result to the revenue. There are in this country a very large number of transactions every day by which small properties are conveyed from one person to another, and it would appear that in every one of those transactions the Inland Revenue authorities are requiring particu- lars, not only of the actual conveyance, but also of the covenants which are embedded in old deeds relating to the title on the off-chance that some of those deeds may perfect their claim for this duty. I maintain that if an account is taken of the amount of cost incurred in putting and answering these questions it would be found to be more than sufficient to cover many times over any possible revenue that can ever be derived in this way. Many of these transactions involve purchase money to the amount of only a few hundred pounds. It represents the value not merely of the land which may possibly be subject to Increment Value Duty if it should have risen in value, but it also presents the value of the buildings on the land, and, probably, in most cases the value of the land itself does not exceed one-tenth of the whole purchase money. Therefore in these cases it is quite obvious that within the last twelve or fifteen months it is absolutely impossible for there to have been any increase in the value of that site sufficient even to pay the cost of returns to be filled up, and, as these taxes are raised for revenue only, it appears to me to be a very strong argument for a new proviso to be inserted in the Finance Act which will exempt small transactions of this kind from the duty altogether. There would be little or no loss of revenue from it, and a vast amount of trouble would be saved to owners of small property. In many of these cases the property is mortgaged, so that the vendor has only a few pounds of net purchase money to receive, and the expense involved in obtaining the information required constitutes a very serious tax indeed to the owner without giving any benefit whatever to the Exchequer. I am afraid that the Chancellor of the Exchequer, when this matter was discussed a few weeks ago, did not fully appreciate the extent of the dissatisfaction which is being caused all over the country. I desire from this side of the House to support the suggestion made, I believe, by the right hon. Gentleman the Member for East Worcestershire, when he so strongly pressed the Chancellor of the Exchequer to consider whether something ought not to be done to meet this grievance. The Chancellor on that occasion did say that he would consider whether it would not be possible to have the point settler without expense to the small owners by a case stated in the courts. There may be a doubt whether the Government were within their powers in making these ex- pensive requisitions, but whether that be so or not it is at all events clear there is no use in exercising those powers in the case of very small properties so far as revenue is concerned. I am sorry the right hon. Gentleman the Member for East Worcestershire thought it worth his while to complain of the Parliamentary style of the Chancellor of the Exchequer in making this concession. I need not, however, enter into that controversy. I only want to emphasise the main point that this concession ought in justice and in policy to be made. I would like to point out that there is already a Parliamentary precedent for it, because when the ordinary Stamp Duties upon conveyances were doubled by the Budget of this year exception was made in favour of small transactions, and it was provided that all conveyances in which the purchase money was under £500 should be subject to the old duty only. I think a similar proviso might very well be inserted in the new Budget as applied to Increment Value.

Mr. DEPUTY-SPEAKER (Mr. Whitley)

I think the hon. Member is going too far. Matters of legislation are not now open to discussion.


I presume I am at liberty, at any rate, to deal with anything that solely concerns administration, and what I do urge is that the Inland Revenue authorities might, at all events, issue a circular which would clear up the question as to what they are really intending to insist upon. Having been in direct communication with them, I have had the opportunity of finding that they do not in practice press to the full extent the powers which they have assumed for demanding information in cases where it is shown that the information asked for is not actually at the command of the persons of whom they are requesting it. What I venture to suggest as a matter of administration is that they should make it clear by a circular to the whole legal profession what concessions they are really prepared to make in cases of this kind. It would clear the air. A great deal of prejudice is being worked up against the Act by these demands. As far as the principle of the Bill is concerned I am warmly in favour of it, and because I believe there is a great future before this class of taxation, I think it is most important that, at the commencement of this new system we should proceed as carefully, cautiously, and considerately as possible, especially in regard to small owners of the class I have mentioned.


We ought to remember that these complaints have arisen to a very large extent because of the very generous treatment which the Chancellor of the Exchequer accorded last year to Tory Amendments. Those Amendments made j these elaborate provisions necessary. The whole object of them was to make exceptions to the rule, especially in regard to Increment and other Duties. They were accepted by the Government; they are now part of the Act, and it is the duty of the Inland Revenue authorities to carry out the law. The requisitions have been made by the Inland Revenue with that sole purpose. No doubt long, complicated, and intricate forms have been made necessary, but I think even small owners will realise that, with a novel law and novel conditions, there must necessarily be intricacy, and that irritation may prevail for a short time. But I have little doubt that, in a few months, we shall shake down into more simple procedure; we shall find out the easiest way of getting the information required, and the small owner will not be irritated in the future in the same way as he now is. The small owner has to remember what the small person generally in this country has to bear in mind—that these taxes are a substitute for a far more unpleasant tax, and against them he is going to receive vast sums of money obtained from the large landowners. If he has got to pay a guinea or two to his solicitor, and the solicitor is able to enjoy that amount, the small owner will know that the large landowner has got to pay a very substantial sum in reduction of local taxation.


I only want to say a few words in answer to two or three of my hon. Friends who have spoken with reference to the Increment Tax. We had a very interesting discussion this afternoon on the valuation, and I think the House will agree with me in thinking that this is not the best time to discuss the principles of the Increment Duty. I would suggest to my hon. Friends that they should wait until the Chancellor of the Exchequer on another occasion connected with this proposal has an opportunity himself of stating his case. Of course, in the working of any new tax there must be inconvenience and friction, but the reports which I have had the pleasure of seeing from a great number of Inland Revenue stations throughout the country—some thirty or forty of the principal centres— show that the proceedings in connection with the stamping of deeds and the transfer of property that the friction connected with them is infinitely less than was expected, is growing less, and that the one difficulty which seems to have been the real trouble and caused friction to the various parties is what has been called the particulars stamp—my hon. Friend knows what I mean. Even that is disappearing, as adjustments have been made between the solicitors and the Inland Revenue authorities, and, I am glad to say, we are getting reports from all over to the country to the effect that, given the necessity for taxation and the desirability of imposing this particular kind of taxation, it is really being carried out with as little inconvenience to the parties as possible. An hon. Gentleman (one of the Members for Worcestershire) raised the question of allowance by way of abatement of life insurance premiums in one payment. As he pointed out, there were three methods of making these premium payments—annual premiums, premiums over a fixed period of years, and a lump sum paid down.

It is necessary to go back, or it would be necessary to go back, if it were necessary at this hour to discuss the whole question, to the Act of 1853, and to recall to our memories for what purpose Mr. Gladstone, as then Chancellor of the Exchequer, made the allowance in the case of life insurance premiums. Very precisely stated it was this: He had great sympathy with the savings made out of income. He desired to give them some relaxation, some respite, from taxation of Income Tax, and he did it as far as he thought proper and right to do it by giving an abatement in respect of sums paid for an annual life policy premium. Most of the lump sum payments are not, however, I am informed, made out of savings. They are as a rule made out of capital and paid by realisations of capital, and therefore they do not come under the heading of annual savings, and it is for that reason that they have not been thought proper subjects for the abatement which is granted in the case of the annual premiums. It is quite true that the Inland Revenue authorities did for some years give an abatement in respect of these lump sum payments, but it was found that they were doing that illegally and the policy had to be dropped, and any alteration which is made in the present system will have to be by legislation. The other point raised about insurance companies dealt with the taxation of investments of life insurance companies. It is a legitimate subject to discuss, and raises a question with which I have had some little sympathy myself; but it would much more properly come upon a Budget Debate than upon a Debate of this sort. My hon. Friend will realise that as the law at present stands, and as the present Administration is carried on, I am afraid we can do nothing in the matter.


Can the right hon. Gentleman tell us whether it is going to be the practice of the Department to construe "as soon as may be" to mean not within seven weeks, in respect of Section 93 of the Finance Act?


I understand from the right hon. Gentleman's statement that at a future date the Chancellor of the Exchequer will make some statement dealing with the increment question as a whole, and I should like to know whether he will make a statement as to the mining royalties and as to the new list in regard to the annual equivalent, because I want to point out that in the North at the present time, as far as I know, and I am acquainted with a great many mining engineers, there is great difficulty in knowing how that annual equivalent is going to be arrived at, and how the data is to be arrived at. These regulations give us no instruction at all, and we are referred to the Finance Act as a whole, and that also gives us no guide. Speaking as the owner of a small amount of minerals, it is very difficult to make a correct return of the amount of minerals which one has, and I think we ought to have some statement as to how that annual equivalent is to be arrived at and how we are to value the minerals. It is not a difficult matter where you have minerals all round you, but if you are on the borders of a district where there may be minerals or not it is very difficult. I know a case at the present time where you may find minerals of fine and good quality on one side of the road, but on the other side of the road, a few yards away, you may find minerals which are not worth working at all, and all these things make the situation difficult from a practical point of view. What I wish to obtain is a clear intimation to enable us to do what we all want to do, and that is to make some declaration as to the minerals which we possess, and to make it in the manner in which the Chancellor of the Exchequer wishes us to make it.


I was very much interested when the right hon. Gentleman began just now to say something with regard to the deductions to be allowed for the amount of the premiums paid for insurance. He began by classifying them as three classes of payment— first, a lump sum, which I fancy he thought was necessarily a payment out of capital and not out of income, and, therefore, an amount which ought not to be deducted; but he did not, at any rate while I was present, go at all into the other two classes of premium, which apparently he thought were proper deductions to be made. I suppose he meant by those other two classes—the full ordinary annual premium about which there is not, and never has been any doubt, so long as you do not exceed one-sixth of the income and the other is known as the abated or reduced premium which is much in vogue amongst professional men and those whose incomes at the moment are less than the incomes that they hope to receive at a future date. These people, in order to get the benefit of the full insurance, immediately make arrangements with the insurance companies to pay a reduced premium for a period of years, sometimes five and sometimes ten, and at a subsequent date they pay a still larger premium. In all these three classes the ordinary full premium can now be deducted so long as it does not exceed one-sixth of the income.

As regards the reduced premium, I should like to know whether the hon. Gentleman thinks that ought to be deducted or whether it ought not to be deducted because it seems to me to be exactly on all fours with the full premium except that from the Chancellor of the Exchequer's point of view it is preferred that the insurance should be paid in that form because the reduction is less and therefore the tax that is paid is greater. Then as to the single premium I think the hon. Gentleman is in error if he thinks that is always out of capital. It is frequently out of income. It may be out of capital perhaps where it is part of a borrowing transaction where the insurance is a means of repaying a sum borrowed and the sum borrowed being perhaps a capital sum, is reduced by the amount of the premium, and therefore it may be said to be a charge on capital and not on income. But there is a large number of forms of insurance which are done by single premiums and recurrent single premiums. That is to say, an insurance of £1,000 is taken out in one year and the full premium paid with the deliberate intention of taking out next year another insurance of another £1,000, and a further full premium paid. If that were continued for ten years it is the exact equivalent of taking out an insurance in the first instance of ten times the amount of the first insurance, paying it by a premium for ten years as if it were an ordinary premium for a limited period. These payments are just as much payments out of income as single premium payments or abated payments or payments at the ordinary rates or payments for a limited period. I think the Chancellor of the Exchequer is well protected by the one-sixth limit. So long as the insurance premiums do not exceed one-sixth of the total taxable income it seems to me quite immaterial whether it is paid by single premiums or by the ordinary premium. I think we ought to have an assurance that these allowances will be made in respect of either form of the three premiums which the hon. Gentleman indicated but hardly referred to just now. There was one other point which was raised by the hon. Gentleman (Sir W. Bull), and not answered entirely by the Chancellor of the Exchequer, although it was referred to earlier in the evening, and that is the hardship that a man may suffer owing to the fact that for ordinary Income Tax purposes he has been paying Income Tax upon an average income. If his income were a dropping income for the three years ending 1908–9 he might easily, upon the average, have got an income for ordinary Income Tax purposes exceeding £5,000 a year, though, in fact, in the year ending 1909 his income was not £5,000. I think for Super-tax purposes there is to be no average allowed.


I think the Chancellor of the Exchequer said the Super-tax would be taken on the average of three years, but I may be mistaken.


I also may easily be mistaken. It was done in such a hurry across the floor of the House that I doubt whether anyone understood what was said. But as I understood the I right hon. Gentleman, he said that the average might be good or bad, but that I the average had nothing to do with Super-tax, and it is that particular point that I want to correct, because it has something I to do with Super-tax. It may bring a man within the limit of the Super-tax: when he would not otherwise, except for the average, be within it. If a man had £15,000 income in one year, £10,000 in another, and nothing in the actual year that we are dealing with, he would be within the Super-tax, although, in fact, during the year he would have no income at all for taxation. I want to know whether that can be, because the Super-tax is a tax in respect of last year. Although, for the purpose of assessment, previous years are considered, it is a tax intended to be paid as a contribution by the taxpayer for the expenses of the past year. Can we, in considering Super-tax, take into account the actual income, instead of the assumed income under the three years' average, for the purpose of ascertaining whether, in fact, a liability exists for the Super-tax of the past year? I do not know whether that is a thing which can be dealt with by regulations. It seems to me that regulations have a varying value according to circumstances.

These regulations were made, fortunately for the officials, on 2nd May, because, to my knowledge, they were served on 4th May, but the date was not discovered until to-day. I was under the impression that the date that the document bore was the date of the making of the regulation. The date on the document is 8th June, but when it is pointed out that the notice, in pursuance of the regulation, was served at an earlier date than 8th June, it was most fortunately discovered that the regulations were in fact made on 2nd May, just two days before the notices were served. I will not comment on that, because I am not competent to join in the most interesting legal argument as to the effect of serving notices in pursuance of regulations before the regulations in fact existed. The ordinary common or plain man thought you could not serve a thing in pursuance of a regulation until the regulation was effective and binding. It is not to be actually, irrevocably binding, of course, until forty days after it has been presented here, but we understand now that it dates back to the date of presentment here. In order to make good the Solicitor-General's point it has to date back further than the date when it is laid on the Table to the date when it was made, but not publicly—made not to the knowledge of anyone except the officials in the Inland Revenue Department perhaps, but made quite privately and without any form of publication to the public at all.

Question, "That the House doth agree with the Committee in the said Resolution," put, and agreed to.

ADJOURNMENT.—Resolved, "That this House do now adjourn."—[Mr. Hobhouse.]

Adjourned accordingly at a Quarter before Ten o'clock.